3rd Place- 2012 AP Econ Video- Rolling in the Green (Monopolistic Competition)

The video discusses the dynamics of monopolistic competition using hair salons as an example. It explains how salons differentiate themselves to attract customers and compete for loyalty. In the short run, they act like monopolies, making profits, but in the long run, they face excess capacity and adjust production to where marginal revenue equals marginal cost. The video also highlights the ease of market entry and exit, and the ongoing rivalry among competitors.

What is the primary goal of hair salons in a monopolistic competition market?

• To offer identical services

• To attract customers for life

• To eliminate all competition

• To provide the cheapest service

In the short run, how do hair salons behave in a monopolistic competition?

• They focus on minimizing costs

• They act as monopolies

• They operate like perfect competitors

• They ignore customer preferences

What is a characteristic of monopolistic competition in the long run?

• No product differentiation

• Excess capacity

• High barriers to entry

• Producing at the lowest cost

How do hair salons in monopolistic competition set their prices?

• Based on government regulations

• To match competitors' prices

• Where marginal revenue equals marginal cost

• To undercut all competitors

What is a key feature of the market structure in monopolistic competition?

• Single seller dominance

• Easy exit and entry

• Identical products

• High barriers to entry